Prime Minister John Key and Labour leader David Shearer have traded blows as the Government's much foreshadowed plans were presented at Parliament's first session for the year.

Key said Labour's year had started badly, while Shearer said all the prime minister's opening speech needed was a punchline because it was a joke.

Before the tit-for-tat, Key was focused on the deficit, saying National had a "clear plan" for building a faster-growing economy.

"We do not know for certain what 2013 will bring, but it will no doubt be another challenging year," the prime minister said.

"But the country is on the right track."

While operating deficits and increased debt had been an appropriate response to the Global Financial Crisis, they had only ever been temporary measures.

"Returning to an operating surplus and starting to bring debt down to more prudent levels will allow the Government to build New Zealand's resilience to future shocks, help lift national savings and reduce future finance costs," he said.

Money from the sale of state-owned energy companies, along with re-prioritised funds, would be used for capital expenditure, and despite a pending court decision, he was confident the first public offering would go ahead this year.

Key said the share offer would be a "shot in the arm" for local capital markets.

The government would also transform three jails into "working prisons" with 40-hour weeks for inmates.

Prisoners at Rolleston, Tongariro and Auckland Women's prison would be engaged in full-time work, education or rehabilitation in a roll-out this year.

Key, saying the move would not provide ''cheap labour'' for the Corrections Department, said National wanted to reduce re-offending by 25 per cent within five years and would open up access to education, training and addiction treatment programmes.

Much of the legislative plan he outlined has already been announced. It includes changes to collective bargaining and labour laws, Resource Management Act changes, and new charter schools laws.

Key said the building of a new convention centre in Auckland, capitalising on the Hobbit films and focusing on free trade agreements, particularly with Asia, would also help the economy grow.

And while our troops would be withdrawing from Afghanistan, New Zealand would increase its foreign policy activity in a bid to win a seat on the United Nations Security Council in 2015.

The housing market has been a hot topic recently and Key used his statement to attack Labour and Greens policies on the issue.

The Government would build 2000 houses over the next two years and would also focus on freeing up land and reducing red tape, he said.

CHEAPSHOTS

Key then turned to Labour.

"David Cunliffe [he staged leadership coup last year] remains as popular in the Labour caucus as a pussy cat at Gareth Morgan's house."

He suggested Labour leader David Shearer get Cunliffe a bell so that "at least next time" he would see him coming.